For one glorious decade, James Murphy was the driving force behind bristly New York punk-funkers LCD Soundsystem. Having willed the band into existence against the odds – burly former soundmen the wrong side of 30 aren't usually allowed to front epoch-defining dance-rock acts – he would have been entitled to ride the gravy train for as long as he could cling on. Instead, he disbanded LCD at the peak of their popularity, with a triumphant farewell gig at Madison Square Garden.

That was in April 2011. So what's he been up to since then? "A lot of time was spent finishing the film about the last show, which was ironic," he reports drily, down the line from New York. "Then I've been producing the next Arcade Fire record, some Yeah Yeah Yeahs stuff, building a studio, DJing a lot, drinking coffee. Getting my shit together – slowly, but unsurely."

He still takes an interest in DFA Records, but as for new music, there isn't any. For now. "I'm still making things, but not with an eye to my next move." But what about the fans? "I don't care! I don't owe anybody." What, not even a discreet 12-inch? "To want me to do something that you want me to do," he reasons, "is to miss the fucking point."

Instead, Murphy's big new project is designing a soundsystem for Manchester International Festival. This bespoke rig will be assembled for three nights in the Barbarella-esque 60s ballroom of the Co-Op's HQ, New Century House, for Despacio – a club night featuring Murphy and his friends David and Stephen Dewaele of Soulwax/2ManyDJs.

It's an event they have fantasised about for years. Soulwax regularly decamp to Ibiza to work on music, often with Murphy in tow (originally, Despacio was envisioned as their "alternative Ibiza party"). A sound engineer by trade, Murphy despairs at high-impact systems, which, in an arms race for power, have become: "Tinny, sad, hyper-aggressive. They don't sound beautiful. If you play certain dance music, great. But if you play jazz or AC/DC, they sound terrible." The Despacio crew also have a problem with a dance music culture, arguably at its most intense in Ibiza, where clubs are seas of camera-phones, with everyone facing a DJ who is often hurtling through a laptop set of faultlessly programmed, formulaic peaks and drops. Where is the love? The patience? The unexpected moments? Despacio, in contrast, will start slowly, probably with an hour of unmixed music – despacio means gradually in Spanish – and the trio will only play vinyl. Not because they are anti-digital, but because it sounds better. And, says Murphy, "It's a challenge. If I don't have it on vinyl, I can't play it. The idea will be to take chances without forgetting the principal thing about DJing: making a fun time for people."

Murphy designed the Despacio soundsystem with John Klett, a veteran New York sound guru who helped build the DFA studio. The technical detail is baffling – "I don't like horns getting in around my 1.6," says Murphy, and who does? – but, essentially, this is a much more powerful version of the old, physically aligned, uncompressed hi-fi disco systems used at, say, Paradise Garage. "It's a simple, floor-standing series of giant stacks, comfortably doing full, smooth sound," explains Murphy. "It's pretty wide-open, pretty raw." The stacks will be arranged in a circle that people can wander in and out of, literally immersing themselves in sound.

If all this talk of vinyl, vintage kit and slower BPMs sounds like a bunch of old farts trying to revive some mythical golden age of disco, Murphy denies the charge. It's about dissent, he suggests, not nostalgia, and questioning the bad habits that DJ software encourages. "If you have a program that helps you mix every song, why would you ever not mix? I played at this thing the other day... there were people there that seemed almost too excited, like I had done something very creative or crazy. I was like, 'It was literally a bunch of fucking songs, dude'. I don't think I did anything exceptional. But what it wasn't was the guy with a computer playing a seamless, pre-programmed festival set, with no adjustments for the crowd, who, at the moment they're supposed to get excited, throw their hands in the air, but in between look kind of listless. That, to me, is really sad."

You will have noticed that this "alternative Ibiza party" is actually happening in, erm, Manchester. But Murphy is happy with how it has panned out. "I've been to Manchester enough to know it's a real place. It's not Factory Records and the Smiths bicycling around. I get it. It's a modern city. If you're trying to have an Ibiza party outside that island, it's the city that makes most sense."

Will Despacio ever make it to 'Beefa? Who knows. The important thing, says Murphy, is that it's happening at all. "A lot of the time you compromise. Which is fine – it's part of not being totally insane. But in the rarefied, ridiculous position Dave, Steph and I are in – being flown places and given money to play records – if you don't ever transfer that into something you believe in, that's ludicrous."

Murphy and the Dewaele brothers have been close friends for years. Dave and Steph DJed at LCD Soundsystem's first ever gig at London's Great Eastern Hotel in 2002 and played the after-show at the Madison Square Garden finale. Less well known is that, every time they meet, the trio get in the studio to work on what is now a stack of unfinished collaborative tracks. So when will we get to hear them? "After being in a 'professional rock ensemble'," says Murphy, with a flourish, "there's a great joy in making music with friends, without any release plan. It's such a great feeling that it's hard to break that by putting it out."